Forex: USD/JPY to correct higher before restart of downtrend: BofA Merrill Lynch

on Feb 5, 2014
Updated: Oct 21, 2019

**, Wednesday 5 February:**

While technical strategists at Bank of America Merrill Lynch see prospects of the USD/JPY advancing further in the short-term, they think the gains should be sold as the current uptick is only corrective. And if the quote slips below the 200-day Simple Moving Average, currently at around 100.09, BofA would conclude that the corrective bounce view is wrong.

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Nevertheless, the bank’s analysts note that “daily momentum is at its lowest levels since the June ’13 low and intra-day charts show a completing Elliott Wave pattern”. They posit that “the pair can rally into the 102.10/103.44 zone (old trendline support, now resistance) before renewed topping and a resumption of the larger downtrend”. It’s all in the charts which follow.

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In Japan, the Nikkei 225 today mimicked yesterday’s rebound on US bourses and opened with a gap up at 14,213.10 from Tuesday’s close of 14,008.47. The Japanese benchmark index finished today’s trading with a 1.23 percent gain to 14,180.38, following choppy and hesitant action in Tokyo.
The Nikkei remains though in precarious terrain after yesterday posting its largest one-day drop since 13 June at 4.18 percent. And today the blue-chip index got nowhere near testing the pivotal 200-day Moving Average, which currently stands at around 14,425.

The Nikkei 225 continues to epitomize global risk sentiment, leading global shares both up and down since late 2012 and the hardest hit index among developed markets so far in 2014, shedding 12.95 percent year-to-date after last year’s 57 percent boom.
In the US today, ADP’s Non-farm Employment Change for January is due out at 13.15 UTC, with expectations for a gain of 191,000 after December’s 238,000.

Analysts at Credit Agricole believe that “key to the market tone will be today’s ADP employment report and [that] a solid release will soothe concerns on US growth caused by the disappointing ISM data earlier this week”. The French bank holds though a below-consensus forecast of 185,000.
Right now, the USD/JPY is trading at around 101.32, down 0.29 percent intraday.


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